Antero Pietila
2007-12-26 08:00:00.0
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BALTIMORE -

As this roller-coaster year of subprime mortgages and foreclosures ends, it is instructive to look at Baltimore in 1933. The Great Depression was at its worst. One in five persons in the local work force was without a job. The unemployed thronged soup kitchens, relief services, police stations and even City Hall in search of money, food or advice.

Among those in desperate straits were homeowners who had lost their means to make payments. Baltimore’s population was 790,000, and 71,070 “native white,” 22,589 “foreign born” and 3,793 black residents owned residential real estate.

The foreclosure crisis was felt so deeply around the nation that President Franklin D. Roosevelt created a special federal agency to bail out defaulted homeowners. When the Home Owners Loan Corporation opened a Baltimore office on July 24, 1933, some 500 desperate applicants showed up the very first day. “They were solid looking citizens, most of them having run into difficulties through unemployment or salary cuts,” a newspaper reported.

One man said he was about to lose a $3,000 property because he was unable to make payments on the remaining $300 balance. The man had lost his job. His savings had been wiped out in two bank failures. HOLC was his last hope.

Another applicant was a black minister, whose house was to be auctioned off that very afternoon. HOLC intervened. Racing the clock, the agency won a reluctant last-minute reprieve from the building and loan association holding the mortgage.

Yet another applicant was a woman who was told that HOLC could do nothing about her situation. She would not take a “no” for an answer. She produced two letters from President Roosevelt in which he assured her of help. She vowed to write FDR again, saying she knew full well the president would do whatever was needed to help her.

Things were not getting better. By Christmas 1933, one family in six in the city was on relief. HOLC’s Baltimore office said that three-quarters of applicants for federal loans were on the verge of insanity or suicide, and without food.

A week before that bleak Christmas, Thomas T. Hammond opened all the gas jets in his Charles Village kitchen. Next to the body of the 61-year-old real estate broker, police found a note addressed to his wife. It was mostly indecipherable, detectives said.

All that could be said with certainty was that Hammond died a mental and material victim of the economic collapse: He had owned the apartment house where he died but had lost it in the economic ruination.

By 1937, HOLC had managed to rescue well over 10,300 Baltimore homeowners from foreclosure. Even so, local financial institutions ended up taking back 7,375 defaulted properties. But local lenders who held those mortgages felt so little need to sell at depressed prices that only 456 foreclosed houses were resold in 1935 and 1936.

“There is no large concentration of distressed housing, and consequently no active campaigns have been undertaken to dispose of such houses,” HOLC observed that latter year.

Hard times put the brakes on housing construction. Only 119 housing starts were recorded in Baltimore during all of 1934, a far cry from 4,871 in 1926.

After bailing out 1 million homeowners around the nation, HOLC was phased out. Its responsibilities were taken over by the Federal Housing Administration, which, using a standardized appraisal system created by HOLC, made homeownership an achievable American dream. Thirty-year mortgages with small down payments replaced seven-year balloon loans that had required hefty down payments and refinancing.

That was one miracle that came out of the Great Depression. Needed now is another miracle — better federal oversight so that future homeownership dreams won’t turn into nightmares.

Antero Pietila is a Baltimore Examiner columnist. He can be reached at hap5905@hotmail.com.